Financing my CT.......Tesla stock or savings account

[HaulingAss]

Many thanks to all who chimed in to help me make an informed decision.
I sold my two firetrucks yesterday and ended up with ten grand plus in my savings account.
I opened up an online stock account and put ten thousand in it.
At todays price that will get me 14 shares and leave a little in the account.
I will then put a thousand a month in my savings for the down payment on my CT.
If I put the grand a month in I should have around 20K if Tesla sticks to my projected build date.
At that point I'll either sell the stock and add it to the down payment or hold it and see how high it goes.
I may buy a few extra shares if the budget allows it depending on if it drops again.
Again, thanks for the replies.

That's a sensible plan and you have a lot of flexibility when your Cybertruck number comes up. I assume that since you are able to save 1K/month that you would also qualify for a auto loan. I'm not a big fan of borrowing money, especially for new vehicle purchases, but having that option can play to your favor here.

I'm also a big fan of not investing money you will need within the next 2-3 years in stocks because stocks are volatile. The good news is, as a stock investor, you get paid a nice premium to assume that volatility in the form of the stock market returning much more, on average, than any bond or T-bill. The market indexes return more, on average, than the interest expense of a reasonable auto loan. A fast growing innovative company like Tesla can put the average market returns to shame.

I would suggest that TSLA stock is likely a very good deal at $700 and it wouldn't be unlikely to be double that if the Cybertruck production ramp is going well by early 2023. In a really bullish scenario, it could be over $2000/share by sometime in 2023. My point isn't that it will be that high, simply that the potential for a good reward is there. What I'm suggesting is that if your reservation number comes up when you expect, TSLA stock will likely be performing well (because that means the Cybertruck production ramp went off well). And if it's not, you will not be forced to sell the stock at an unreasonably low price because you can use an auto loan and not pay it off until the TSLA shares are more fairly valued. But the auto loan is just a back-up plan to give you flexibility. There's a good chance you won't need the loan because the Tesla shares will probably be worth at least as much as they are now once the Cybertruck production ramp goes well enough that your Cybertruck is ready for delivery. Because your number is not going to come up unless the production ramp goes off reasonably well.

I'm pretty financially conservative but those who are even more so will warn that this is still a risky method. Funny thing is, those people are the most likely people to use auto loans for their new car purchases. In the end, only you are know what your exact financial situation is and how money impacts your emotions and therefore your life. So, only YOU can decide what's right for YOU! That's the beauty of life, we get to make our own decisions and live with them. Those unwilling to take even reasonable risks have to live with the consequences of those decisions too.

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[Ogre]

Well my comments on this thread did not age well.

Hopefully you bought.

Still think all of my posts are fine. Always easier to look backwards.

 

[Quicksilver]

I invested another 5K in my stock account which allowed me to buy 21 shares at about 721 per share.
Telsa closed at $1,114.00 today.
I'm around $14,500 to the good.
Several of the financial pundits I follow are predicting between 2500 and 3500 per share by 2025.
Even the lamestream financial media is finally realizing the Tesla is going to eat the other automakers lunch once they get ramped up at Berlin and Austin.
As long as Tesla stays under 1500 I'll keep buying rather than putting the money into a savings account that pays almost zero interest.
I'm in for the long haul and will not sell any of my stock anytime soon.

 

[Ogre]

Several of the financial pundits I follow are predicting between 2500 and 3500 per share by 2025.

I love me some Tesla.

I think that’s possible, but as we get bigger, it gets harder and harder to maintain that massive forward PE Ratio. For example, to get 3500/ share we might need need 6x earnings or more.

Even that is possible as Tesla has tons of operational leverage (most of their costs are per unit) and high margins (they make a bunch of profit per unit) so as they grow their operating margin (total revenue divided by total cost of doing business) goes up.

In other words… as Tesla scales, they make money faster but each extra dollar of profit affects the share price a little less.

I made the mistake of taking Tesla money off the table once, likely to only pull small amounts out in the future.

 

[UpToNoGood]

Buy more TSLA and hold all you have. They might just do another 5-1 split. I plan to pay off my house in 5-10 years with my TSLA stock.

 

[SpaceDoc]

I had an interesting conversation with my banker the other day. This is the lady that helped me pay off a big credit card balance and gives me sound financial advice.
I have a thousand dollars a month to save toward the down payment on my CT.
According to my information my truck should be built sometime around 5/26/2023.
Not counting what I have in my savings already that is around 21 months away.
If I put a thousand a month in the bank I will draw .05 percent interest on it.
Tesla stock is around 715 a share which means I would own around 35 shares when I have to pony up my down payment.
Now I realize that the stock price is prob going to increase so I could end up with less stock.
Let's assume when I am ready to sell the average price I paid for share is 900 bucks but the stock is gone up to 1100 a share.
But because the stock price went up I only end up with 29 shares with gives me 31,000 for my down payment.
If I had put the money in my savings account I would end up with 21,000 plus what I have in there now which would end up at 25,000. That's a six grand difference.
So I would ask those of you who are more financially inclined......do I take the safe route and put it in the bank or do I shoot the dice and hope the stock is up enough to give me a lot more down payment.
My banker (who was not well versed in Tesla since she had not done brokerage work in several years) said at my age to play it safe and put it in the savings.
The financial heads on YouTube that I follow say Tesla could be at 2000 a share by 2025.
Any thoughts on the above?

Confused. when would you buy your shares?
The number of shares does not decrease based on the price, they appreciate, which is the while point of owning shares.

A MUCH better strategy would be to make your monthly deposit into a stock index fund, which would grow at the rate of the index. Of course, there could always be a downturn in the markets, but the general trend over time is stock market growth.

So it ultimately depends on your risk tolerance.

A plain old savings account is very secure, but has crap for returns.

Some other options would be bond funds, TIPS, or other more conservative investments, that are still better than a plain savings account.

Also, if you invest in any stocks or index funds, if you do well, there will potentially be a tax hit when you cash in to buy your CT, though if held for the requisite period, the cap gains rate is lower than the ordinary income tax rate.

This is free advice, so take it with a grain of salt.

you might join a forum such as the Bogleheads and ask your questions there.

link… https://www.bogleheads.org/forum/viewforum.php?f=10

good luck!

 

[SpaceDoc]

One of the big things you are forgetting about is that you are going to be taxed on the capital gain on sale of Tesla stock. Any shares that you buy today and then sell in May 2023 will be taxed at long-term capital gains rates. Anything bought and held less than a year will be taxed much higher short term capital gains. The theoretical accumulated wealth that you would get from having bought and sold Tesla stock until you buy the cyber truck is negated by the fact that you’re going to be paying tax rates of 25% or more when you sell the stock.

Will the tax rates be higher in 2023 than they are today under the Biden administration with their trillions of dollar spending programs. Sooner or later you can’t tax the rich enough to pay for all these programs. You could very well end up having less money from the sale of your stock then you would if you just saved the money and put it into the bank. It’s an interesting question though not quite as easy of an answer as it would seem. I am TSLA stockholder, not planning on selling my small number of shares to help me purchase my truck. I’m saving my money for that day I get the call my truck is ready. My TSLA shares are for the future growth, not a piggy bank.

Actually you can tax the rich enough to pay for it.
The tax rates on the very wealthy used to be upwards of 40-50% in the 1950s/60s.
After decades and decades of lobbying the rates are the lowest they’ve EVER been, hence the huge gap between rich and poor in the US.

In any event, the tax on a few tens of thousands of dollars is unlikely to change much on persons in most tax brackets. Though capitol gains might be taxed at ordinary tax rates in the near future.

Agree 100% on keeping TSLA shares for growth, and not a piggy bank. That seems ill advised for that purpose, though the dude that asked the question seems to have gone that route.

 

[SpaceDoc]

Great points.

It’s not so much that sentiment will go against Tesla, but that other car makers absolutely have to, and will, make competing EVs, so there is no future where Tesla is the only maker of decent EVs that people want to buy.
When that happens they will no longer have a corner on the market. Then their share price will come down to earth, at least to some degree. This will probably take a few years, but it will happen. If Tesla can mass produce a great EV that doesn’t cost an arm and a leg, then they might delay the inevitable for a few more years. But again, there is no future where Tesla is the ONLY maker of high quality EVs.

 

[Ogre]

Why would you assume this?

GM is selling 6.8m vehicles/ year and this number has been declining for 3+ years. In 10 years, 90% of their production lines will have to transition to electric. GM has spent the last ~10 years working on building EVs and they ship only a few models with tiny margins. Most of that time they outsourced much of the work to LG so they have pretty much no shipping products with their own in-house engineering behind them.

GM has quite a bit of debt and that debt is all on facilities and products which are largely obsolete or will be well before that debt is paid off. On top of all of this, GM‘s revenue has been declining since 2014.

Tesla has higher margins than GM, even if you compare Tesla’s EVs to GMs ICE vehicles. Their production is the most efficient in the industry (according to VWs CEO). Their EVs are the best in the industry (Ford’s CEO). Tesla is bringing enough production capacity on line in 2022 to double their output. They have enough space in their the facilities to double capacity again by 2023-2024.

Even as they’ve built up that capacity, they reduced debt by ~$6b.

I’m not going to try and justify Tesla’s valuation, but comparing them to GM makes zero sense. You don’t compare a growth company to a sickly behemoth that has been shrinking for 7 years.

 

[Ogre]

I could talk about how their operating margins are crushing the industry averages. I could talk about the potential revenue from Tesla insurance which has access to vastly better driver information than the rest of the industry. I could also talk about the virtual power grid and the importance of power storage in the future of energy. I might talk about the fact that VW and GM don’t control distribution of fuel/ power and the location of where it’s distributed.

But that’s all going to fall on deaf ears.

Instead I’ll ask you a question. What was Nokia’s market cap when the iPhone was launched? Heck… add up, Nokia and Blackberry, the two largest phone companies in the world at the time. What were their market caps and valuations?

Now what is Apple’s market cap? When paradigms shift, the economics of those industries change.

Tesla is speculation on that promise. It is absolutely impossible to justify at current prices. It is also impossible to write off by comparing it to the existing players. The paradigm is changing. Opportunities are different than they were for the old players.

 

[HaulingAss]

I'm an experienced investor and have been much more profitable over the last 30 years than most investors. It's apparent to me that most people do not understand Tesla as a company or as an investment. This is made crystal clear every time Tesla's valuation is compared to legacy auto. There is a reason legacy auto has very low valuations - they are shrinking and struggling with growing (or even maintaining) profits. Don't compare unlike things simply because they are both called "automakers". People want to own a piece of a growing pie, not one that is shrinking.

The efficiency with which Tesla can build cars is only now starting to be understood. I was made aware of this potential before they even became profitable and have been handsomely rewarded by investing against conventional wisdom. It was not blind optimism that made me invest such a large portion of my net worth, actually it was quite the opposite - cold, hard analysis that led me to conclude legacy auto had lost their way, were inefficient and had forgotten what real innovation was. This left the door wide open for a company that wanted to re-think every aspect of making cars (right down to the frame and powertrain) in order to make cars simultaneously better and less expensive. Any company who could make a better car for less was going to be dominant in the auto market because they would have ultimate pricing power. In good times they can make obscene margins and in bad times they can still sell every car they can make at a profit.

Legacy auto is like a huge ship that takes forever to turn themselves around. Most of them will sink before they can achieve meaningful reform. Tesla is going to grow as fast as possible and their superior manufacturing efficiency and innovation is going to ensure that no one can compete effectively against them. At first they were just a small thorn in legacy auto's side. Now they are taking away a significant amount of legacy auto sales. As they continue to grow they will continue to eat into legacy auto's sales. As Tesla's sales grow they gain volume efficiencies in addition to the organic efficiencies they have now. And legacy auto has eroding volume efficiencies which will further strengthen Tesla's pricing power and make it increasingly difficult to compete against Tesla.

This is not about cupholders, and styling, it's not about fads and consumer preferences, it's about the cold, hard value of a person's money. Most car buyers want good value for their hard-earned and limited dollars and no one can offer more value than Tesla and the difference is only growing larger each passing year. Currently, ICE cars stand a fighting chance because EV cost curves have only recently reached parity with ICE. But this cannot last long because EV cost curves are still dropping while ICE cost curves are still rising. At the same time consumers are slowly discovering the actual value of EV's over ICE. The forces at work are cold, hard facts and are not likely to change. Batteries will continue to fall in price. Tesla will continue to innovate at a faster pace than anyone else for two reasons:

1) They attract the best talent.
2) They have built a corporate culture over the previous almost two decades that cannot be quickly replicated.

In a nutshell, this is why TSLA's valuation is not over-extended and why TSLA will continue to have superior returns for years to come. Basically, no, the competition is NOT coming. And it never has been. Anyone who compares the valuation of Tesla to legacy auto exposes that they don't know what they are talking about.

 

[CyberT]

I'm an experienced investor and have been much more profitable over the last 30 years than most investors. It's apparent to me that most people do not understand Tesla as a company or as an investment. This is made crystal clear every time Tesla's valuation is compared to legacy auto. There is a reason legacy auto has very low valuations - they are shrinking and struggling with growing (or even maintaining) profits. Don't compare unlike things simply because they are both called "automakers". People want to own a piece of a growing pie, not one that is shrinking.

The efficiency with which Tesla can build cars is only now starting to be understood. I was made aware of this potential before they even became profitable and have been handsomely rewarded by investing against conventional wisdom. It was not blind optimism that made me invest such a large portion of my net worth, actually it was quite the opposite - cold, hard analysis that led me to conclude legacy auto had lost their way, were inefficient and had forgotten what real innovation was. This left the door wide open for a company that wanted to re-think every aspect of making cars (right down to the frame and powertrain) in order to make cars simultaneously better and less expensive. Any company who could make a better car for less was going to be dominant in the auto market because they would have ultimate pricing power. In good times they can make obscene margins and in bad times they can still sell every car they can make at a profit.

Legacy auto is like a huge ship that takes forever to turn themselves around. Most of them will sink before they can achieve meaningful reform. Tesla is going to grow as fast as possible and their superior manufacturing efficiency and innovation is going to ensure that no one can compete effectively against them. At first they were just a small thorn in legacy auto's side. Now they are taking away a significant amount of legacy auto sales. As they continue to grow they will continue to eat into legacy auto's sales. As Tesla's sales grow they gain volume efficiencies in addition to the organic efficiencies they have now. And legacy auto has eroding volume efficiencies which will further strengthen Tesla's pricing power and make it increasingly difficult to compete against Tesla.

This is not about cupholders, and styling, it's not about fads and consumer preferences, it's about the cold, hard value of a person's money. Most car buyers want good value for their hard-earned and limited dollars and no one can offer more value than Tesla and the difference is only growing larger each passing year. Currently, ICE cars stand a fighting chance because EV cost curves have only recently reached parity with ICE. But this cannot last long because EV cost curves are still dropping while ICE cost curves are still rising. At the same time consumers are slowly discovering the actual value of EV's over ICE. The forces at work are cold, hard facts and are not likely to change. Batteries will continue to fall in price. Tesla will continue to innovate at a faster pace than anyone else for two reasons:

1) They attract the best talent.
2) They have built a corporate culture over the previous almost two decades that cannot be quickly replicated.

In a nutshell, this is why TSLA's valuation is not over-extended and why TSLA will continue to have superior returns for years to come. Basically, no, the competition is NOT coming. And it never has been. Anyone who compares the valuation of Tesla to legacy auto exposes that they don't know what they are talking about.

Ditto. I was going to basically say the same thing. Thanks for saving me the time! lol

 

[SpaceDoc]

I'm an experienced investor and have been much more profitable over the last 30 years than most investors. It's apparent to me that most people do not understand Tesla as a company or as an investment. This is made crystal clear every time Tesla's valuation is compared to legacy auto. There is a reason legacy auto has very low valuations - they are shrinking and struggling with growing (or even maintaining) profits. Don't compare unlike things simply because they are both called "automakers". People want to own a piece of a growing pie, not one that is shrinking.

The efficiency with which Tesla can build cars is only now starting to be understood. I was made aware of this potential before they even became profitable and have been handsomely rewarded by investing against conventional wisdom. It was not blind optimism that made me invest such a large portion of my net worth, actually it was quite the opposite - cold, hard analysis that led me to conclude legacy auto had lost their way, were inefficient and had forgotten what real innovation was. This left the door wide open for a company that wanted to re-think every aspect of making cars (right down to the frame and powertrain) in order to make cars simultaneously better and less expensive. Any company who could make a better car for less was going to be dominant in the auto market because they would have ultimate pricing power. In good times they can make obscene margins and in bad times they can still sell every car they can make at a profit.

Legacy auto is like a huge ship that takes forever to turn themselves around. Most of them will sink before they can achieve meaningful reform. Tesla is going to grow as fast as possible and their superior manufacturing efficiency and innovation is going to ensure that no one can compete effectively against them. At first they were just a small thorn in legacy auto's side. Now they are taking away a significant amount of legacy auto sales. As they continue to grow they will continue to eat into legacy auto's sales. As Tesla's sales grow they gain volume efficiencies in addition to the organic efficiencies they have now. And legacy auto has eroding volume efficiencies which will further strengthen Tesla's pricing power and make it increasingly difficult to compete against Tesla.

This is not about cupholders, and styling, it's not about fads and consumer preferences, it's about the cold, hard value of a person's money. Most car buyers want good value for their hard-earned and limited dollars and no one can offer more value than Tesla and the difference is only growing larger each passing year. Currently, ICE cars stand a fighting chance because EV cost curves have only recently reached parity with ICE. But this cannot last long because EV cost curves are still dropping while ICE cost curves are still rising. At the same time consumers are slowly discovering the actual value of EV's over ICE. The forces at work are cold, hard facts and are not likely to change. Batteries will continue to fall in price. Tesla will continue to innovate at a faster pace than anyone else for two reasons:

1) They attract the best talent.
2) They have built a corporate culture over the previous almost two decades that cannot be quickly replicated.

In a nutshell, this is why TSLA's valuation is not over-extended and why TSLA will continue to have superior returns for years to come. Basically, no, the competition is NOT coming. And it never has been. Anyone who compares the valuation of Tesla to legacy auto exposes that they don't know what they are talking about.

You’re an experienced investor, but are you a successful one? These two are often not well correlated. ?

As I said in a previous comment in this thread, the world where Tesla is the *only* EV maker does not and will not exist. Therefore, other manufacturers (legacy companies, new ones, and ones nobody’s even heard of yet) will fill the void and make EVs that people have to buy because they can’t afford the premium cost of a Tesla, there are not enough Teslas to go around, or they want to buy another maker’s EV because those other EVs fill their needs better than a Tesla. Also, it is extremely likely that eventually the majority of EVs sold worldwide will not be Teslas.

A great analogy would be Ford making the Model T at the start of the last century. How long was it until they had major competition? Not that long. Years, not decades.

In the real world where Tesla is not the only maker of EVs that people buy, and where massive competition is coming in earnest — this will eventually put downward pressure on Tesla’s stock price. It’s inevitable. Not to say owning Tesla stock is not a great bet for the future, but there will be other ponies in the race.

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